OMV exits Sudanese blocks

ONGC Videsh Ltd (OVL) has signed an agreement with Austria's OMV Aktiengesellschaft (OMV) to buy its two onshore exploration blocks in Sudan. While the deal is subject to approval by the Sudanese government and the company's project partners, OVL is expected to pay around US$115 million for the OMV's stake in exploration blocks 5A and 5B.

From news reports it is understood the company is buying a 26.125% stake in 5A and a 24.5% stake in 5B. Both blocks are located in the Muglad basin and are adjacent to the Greater Nile Oil Project. Coincidentally, OVL has a 25% stake in latter, which it bought in March from Canada's Talisman Energy Inc.

Block 5A has gross proven and probable oil reserves of 149.1 million barrels and contains the still undeveloped Thar Jath field. The operator of 5A is Malaysia's Petronas Carigali Overseas Sdn Bhd (68.875% stake). Sudan's Sudapet owns the remaining 5%. Independent estimates put the possible potential reserves in the block, which measures 20,917 km and has four previously drilled wells, at over 2 billion barrels.

In Block 5B, Petronas owns a 41% stake, Sudapet has 10% and Sweden's Lundin Petroleum AB owns 24.5%. OVL would be taking over OMV's share. This large block is located in the Sudd swamp and measures around 20,119 square kilometres.

Gravity and seismic interpretation surveys have shown that the Muglad rift basin extends into Block 5B and that the structural style of the area is similar to the rest of the basin. If this proves to hold true, the shareholders stand to gain from heavily from a zone that has already yielded more than one billion barrels of oil to date.